Hong Kong can retain its special status with the US if it cultivates its differences from mainland China

  • Janet Pau says as the trade war and a US report raise questions about how Hong Kong will be treated, it must strengthen its role as a guardian of global norms
  • It is imperative to safeguard and enhance Hong Kong’s rule of law, intellectual property protections, financial market expertise and academic freedom
PUBLISHED : Friday, 23 November, 2018, 11:07am
UPDATED : Friday, 23 November, 2018, 6:00pm

Technological competition is at the heart of the current US-China trade conflict. What is at stake is which country can best turn technological innovation into a new engine of growth. At a time when Hong Kong officials say that the city has to “prepare for the worst”, it would do well to examine where it can add real value. What are Hong Kong’s unique characteristics in competing in the new digital economy? Is it condemned to be “just another Chinese city”, as pessimists have predicted, or should it aspire to distinguish itself?

The just-released US-China Economic and Security Review Commission report brings into focus the dilemma that Hong Kong finds itself in. The question raised over whether Hong Kong should continue to be treated as a separate customs area for dual-use technology with civilian and military aims suggests how a worst-case scenario might play out, one in which the US’ hardline approach on trade with China threatens Hong Kong’s unique trade status. The report also noted Hong Kong’s self-positioning as a “key node” of the Greater Bay Area, which the US sees as a competitor in technology.

When China was hit with an embargo as a result of the Korean war, Hong Kong was cut off from many US shipments as American companies didn’t want to take the chance that their goods would be smuggled into the People’s Republic. Today, curbing the transfer of US technology seen as sensitive could disrupt key sectors including medical and telecommunication technologies, as well as technologies crucial to the realisation of Hong Kong’s “smart city” ambitions.

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Hong Kong’s competitive advantage in technological innovation hinges on preserving the perception that it is different and can play a unique role that no one else can fill, notably Shenzhen, the technology epicentre of the Greater Bay Area, which has prospered through forging a less state-controlled, more private-sector-driven economic path. Shenzhen-based companies in sectors ranging from drones to genomics have grown rapidly and become competitive overseas.

But the weaknesses of Shenzhen and other Chinese technology hubs are Hong Kong’s core strengths. Hong Kong’s strengths are its rule of law and mature regulations, its intellectual property protection and asset protection regimes, its financial markets and expertise, and its protection of individual privacy and freedoms. Mainland Chinese elites buy property and let their children attend international schools in Hong Kong that teach students about world-class innovation and entrepreneurship.

Hong Kong’s role as a guardian of global rules and norms, an active participant in, and host to, global institutions, and a connector between mainland China and the world, must be maintained if it wants to convince foreign governments that it continues to deserve its special status. It must preserve wider space for diversity of opinions and academic freedoms so the best research that comes out of Hong Kong can compete with world-class research and innovation elsewhere.

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If immigration makes it harder for top Chinese technology talent to study or work in the US, Hong Kong should try to attract them here, and not just with financial incentives but a closer look at factors such as whether other top talent is here, whether the opportunities are exciting, and whether Hong Kong is an appealing place to live and raise children. If Hong Kong gets these right, its talent base will grow, in turn benefiting partnerships with entrepreneurs and manufacturers in Shenzhen and the Greater Bay Area.

Hong Kong can also expand its role as a hub of expertise on questions related to data privacy and legal protection, which will invariably be raised as artificial intelligence technologies become more widespread, for example, when Chinese technology companies expand into belt and road countries.

Engagement and collaboration with other Chinese cities are important for Hong Kong, but subordinate to preserving the rule of law and the diversity of ideas, which are not only crucial strengths of Hong Kong, but also important elements as China seeks to upgrade its technology sector to become world class. They are what make Hong Kong special and set it apart from being “just another Chinese city”.

Janet Pau is programme director of the Asia Business Council